JERUSALEM, Nov 8 (Reuters) - A special appointments panel approved U.S. finance professor Amir Yaron as governor of the Bank of Israel on Thursday, a statement from the prime minister’s office said.

Prime Minister Benjamin Netanyahu last month named the Israeli-born Yaron, a professor at the Wharton School of the University of Pennsylvania, to replace Karnit Flug, whose term ends next week. The appointment still needs final approval by the Israeli cabinet.

Yaron, 54, will take over at a time when the Bank of Israel is on the cusp of starting to raise interest rates amid a gradual rise in inflation.

If approved, he would become governor at a pivotal time for Israel’s economy, which is growing at a solid annual pace of about 3.5 percent.

The benchmark interest rate has stayed at a record low of 0.1 percent since early 2015. The central bank’s own economists expect a 15 basis points rate hike in the first quarter and one more quarter-point move in 2019 to bring the rate to 0.5 percent by the end of next year.

“I am certain professor Amir Yaron will lead the Bank of Israel responsibly and that he will help Israel’s economy to keep succeeding,” Netanyahu said in a statement after the panel’s approval.

The vetting committee said it “found no fault” in Yaron’s moral conduct.

Analysts believe the Bank of Israel will likely focus more on asset price inflation under Yaron. (Reporting by Steven Scheer and Maayan Lubell; Editing by Alison Williams)